Issue link: http://resourceworld.uberflip.com/i/685011
56 www.resourceworld.com J U N E / J U L Y 2 0 1 6 the oil patch report B r u c e L a n t z T he deck, it would seem, is stacked against LNG (liquid natural gas). And this particular house of cards is in danger of toppling, taking jobs and invest- ment with it. As if LNG projects didn't have enough problems, now they're faced with hydraulic fracturing, or fracking – the best method to get at the highly-desirable unconventional natural gas embedded in underground rock formations. British Columbia has banked on the likely success of LNG exports to Asia – touted by Premier Christy Clark as the generator of thousands of jobs and billions in royalty revenues – only to encounter stumbling blocks as the companies involved delay their final investment decisions or even back out altogether. As if that wasn't enough, new studies reveal that fracking, a mainstay of the LNG business, causes earth- quakes – albeit minor ones. Slight seismic activity is a normal part of fracking. The energy released in this process causes seismic activity that's rarely felt on the surface and usually occurs near where the rock is being fractured – 2-3km underground. Fracking isn't new. Mark Salkeld, President and CEO of the Petroleum Services Association of Canada, says it has been used in Western Canada for 60 years. "Hydraulic fracturing is a regulated, safe, controlled and essential process for recov- ering natural gas from deep geological formations," he said. "There is an emerg- ing consensus in the scientific community that seismic activity from hydraulic frac- turing poses minimal risk." But, a report in the Journal of the Seismological Society of America finds that 90-95% of seismic activity of Magnitude 3 or more in the past five years in the Western Canada Sedimentary Basin was caused by oil and gas activity, most of it linked to fracking. And the BC Oil and Gas Commission has issued two reports link- ing hydraulic fracturing to earthquakes. Both reports stressed that a comprehen- sive regulatory framework is in place to ensure the continued responsible devel- opment of unconventional resources. None of the seismic events studied in these two reports, and none of the events subsequently recorded, caused injury or property damage. The USGS says (on its website) that fracking causes extremely small earth- quakes, too small to be a safety concern. However, fracking fluids and salt water trapped in the same formation as the gas are returned to the surface and frequently are disposed of by injection into deep wells, which can cause earthquakes large enough to be felt and cause damage. In Canada, Québec, New Brunswick, Nova Scotia, and Newfoundland and Labrador have temporarily banned frack- ing. Bans have been implemented in Germany, France, Bulgaria and Scotland, while the UK, Romania, Denmark, Ireland, South Africa and the Czech Republic have temporary moratoriums on it. In the US, New York State and Vermont have banned it, as have some municipalities. "Industry is aware of the link between hydraulic fracturing and seismic activ- ity," said Markus Ermisch of the Canadian Association of Petroleum Producers. "The safety of our workers and the safety of the people near whose homes we operate is our first priority." Ermisch said the safe and responsible development of natural gas resources is "feasible and necessary" to open up new markets, especially for LNG. Industry is contributing financially to improve seismic monitoring in northeast BC and producers have developed an oper- ating practice designed to establish monitoring, mitigation and response procedures to avoid or minimize adverse effects of induced seismicity associated with fracking. "BC's comprehensive regulatory frame- work and voluntary industry operating practices ensure the continued responsible development of the province's natural gas resources," he said, adding that fracking operations are suspended at wellbores that trigger seismic events of Magnitude 4.0 or greater until the operator implements mea- sures to reduce seismicity. In future, the industry expects regu- lators to modify regulations prompting changes in operating practices where areas for improvement are identified, Ermisch said. "This has always been the case and will continue to be the manner in which our industry operates." In fact, said Salkeld, fracking is essen- tial to the LNG industry. "Hydraulic fracturing is an essential process for recovering natural gas from deep geological formations in Canada," he said. "Without hydraulic fracturing, there would be no LNG industry and I think a lot of folks may not realize that." But LNG has greater worries than seis- mic activity. With global prices down 50%, Australia and the US already ship- ping LNG, and most of the BC proponents either stalling or backing out of their proj- ects, some experts suggest it may be 2020 before even one plant comes online in BC. From a high of 18 companies planning to build LNG facilities in BC, the list of likely projects has narrowed considerably. The Petronas-backed Pacific Northwest $36-billion LNG project is the most likely to go forward, though they still need approval from the federal government and face opposition from several First Nations. All that is a far cry from Premier Clark's election promise that LNG – and revenues – would be flowing in 2017. n Fracking and LNG: can they co-exist?